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Why Spending, Sales Are Up for Dietary Supplement Emergen-C

Five Questions for Ken Vargha, VP-Sales and Marketing, Alacer Corp.

NEW YORK (AdAge.com) -- Ken Vargha has quite a marketing resume: In the past 15 years, he's helped promote everything from Pantene shampoo and Maybelline makeup to hair-loss treatment Rogaine and Invisalign braces.

Ken Vargha
In February, he joined Alacer Corp., the Foothill Ranch, Calif.-based maker of Emergen-C dietary supplements. As VP-sales and marketing, Mr. Vargha occupies the company's top marketing post. He reports to President-CEO Ron Fugate and liaises with the marketer's lead creative agency of three years, Karlen Williams Graybill Advertising, New York (yep, they're the ones responsible for those zany Bollywood ads).

As most marketers have been concentrating on cutting ad dollars, Alacer has been steadily increasing its marketing budget -- to $8 million last year from $6 million in 2007, according to TNS Media Intelligence. Another increase of 20% is slated for 2009.

Emergen-C is known for its drink-mix nutritional supplements, but more recently it launched a line of ready-to-drink beverages. The products sell in health-food stores and supermarkets and have been a success story in a bad economy in part because of a recession-friendly price point of as low as 49 cents a packet or $10.99 for a box of 30.

Mr. Vargha, who drinks a blend of pink-lemonade and berry-blue Emergen-C daily, talked to Ad Age about his personal marketing style, working with a small agency and more.

Ad Age: How have you altered Emergen-C's marketing strategy to better connect with consumers during recession?

Mr. Vargha: We're sensitive to our consumers and what they are going through, so we have been working with our retail partners to make sure that everyone is getting a good value. We're scheduled to increase spending for marketing support starting the fiscal year on July 1. Our business is up 20%; we are scheduled to increase media spending by 20%. As an overall media mix, we're putting more into advertising. Sampling is also a key driver of our business, and we give out eight to 10 million samples a year. We feel that when people try our products, that's where the conversion process really happens. Online we are still learning our way through exactly how we do it.

Ad Age: Did the swine-flu scare help boost sales of Emergen-C?

Mr. Vargha: The [Food and Drug Administration] was really clear that nobody was to go out and call attention to their products and how they could help vis-a-vis swine flu. But consumers went out on their own [to make purchases], and we saw huge spikes. When H1N1 was at its peak in the media, consumers turned to our products and other natural products in the marketplace. It's not the first time. Going back to the avian flu a few years ago, the industry saw a surge in consumption at that time. At the core, I think that people today would rather take something to improve themselves naturally rather than turn to drugs.

Mr. Vargha: The biggest challenge that we face as an industry is a perception that we are unregulated. However, we are, by the FDA's Dietary Supplement Health and Education Act that has been around for more than 10 years. As marketers we need to know where the line is when we make claims and stay on the right side. I'm actually more concerned about the recent story I read about Bayer's One A Day multivitamin with selenium having its claims challenged. ... I'm concerned about household names crossing the line and calling into question an entire category for consumers. While it's one thing when a smaller company is called into question, it's an entirely other to have mainstream companies being called to task -- that has the potential to shake consumer confidence more and, in turn, affect us and the entire industry.

Ad Age: Before you came to Alacer Corp., you worked for mega-marketers such as Procter & Gamble, so you've probably worked with a lot of big agencies. What are the advantages and disadvantages of working with a smaller shop like you do now?

Mr. Vargha: Over the years, I've enjoyed interacting with many big agencies, like Grey, [Leo] Burnett, TBWA/Chiat/Day and the Martin Agency. Each comes with its own nuances, strengths and weaknesses ... from way-out-of-the-box creativity to the tried and true. One item that ties the best relationships together, though, whether large or small, is passion. What I like about working with a small agency like KWG is there is passion across the team. There's also continual access to and involvement of the partners and someone who really understands the needs of small to midsize brands. As far as downsides, I don't really see many. If they don't have it, they'll look for it, find it and get it.

Ad Age: How would you describe your personal marketing style?

Mr. Vargha: I'm heavily data-driven. I don't like the idea of just saying, "Trust me, it works." I want to be able to go before our board of directors to say that, "You gave me this much more money this year, and I'm going to return on that investment for you." I'm very comfortable with data and demand that from the people on my team instead of just going with the gut. That said, I respect the creative side of the process. There is a magic in working with highly creative, brilliant people, and you need to give those people room.